Insomnia wide awake: ThePost.ie


TCH Archives > Sunday Business Post > 2005/08/28 > Insomnia wide awake

Insomnia wide awake
Sunday, August 28, 2005 - By Catherine O'Mahony
There's a touch of David and Goliath about the challenge facing the Irish coffee market at present.

There's Insomnia, the largest Irish-owned coffee chain, with a respectable turnover of €7 million and 20 outlets.

And then there's Starbucks, the global coffee monster, with 9,000 outlets, €1.6 billion in sales - per quarter - which has just launched a mission to conquer the Irish market.

Wouldn't you be a little worried? Not Bobby Kerr, recently appointed chief executive of Insomnia.

“We know Starbucks,” he said. “We respect them, but we don't fear them. They're coming into a very developed market. It's not like a whole new dawn, which they may have experienced in other markets. And we have 20 sites.

“So far, they've got one.”

As for Costa, the British chain which is also said to be eyeing the Irish market, Kerr said he “hasn't seen much of them'‘.

“Generally, the market is heading for more consolidation, and the small Mom and Pop outlets will probably be squeezed out,” he said. “But there are still loads of opportunities.”

Kerr is probably in a better position than many to judge.

Born in Kilkenny, he comes from a sound catering background.

His late father (also Bobby) used to manage Jurys Hotel in Dublin, before founding the New Park Hotel in Kilkenny in 1966. The large Kilkenny hotel and its attached leisure centre is still owned by the Kerr family, and Bobby jnr helps to run it, commuting to Kilkenny from Dublin one day aweek.

His father, he said, was an “old school'‘ hotelier, always out on the floor, inspecting, meeting and greeting. “He taught me a lot about standards, and about how to manage your time,” said Kerr.

At 45, Kerr is a veteran of the coffee business, which has been his milieu for close to two decades. After taking a business degree in the DIT on Cathal Brugha Street in Dublin, he worked as a chef on oil rigs for a time, and went on to work in catering in Canada and the US.

Kerr came home to join the Campbells Bewley's group in 1986, and managed the Campbells catering contract in UCC for several years. He was promoted to managing director of the Bewley's cafe network, which at its height included 30 outlets and a bakery.

However, that was an era when a iced bun and a cup of tea or standard coffee were all it took to satisfy the average Irish appetite for a snack - long before the days when a toasted bagel plus a grande skinny latte became the order of the day.

“It was a totally different company then,” said Kerr, recalling a time when Bewley's had turnover of about €45million.Kerr said he remained on good terms with Bewley's, but regretted what became of a company that once had a near monopoly on hot beverage sales in Ireland but recently closed its last few remaining cafes.

“What could have been an opportunity was lost,” said Kerr. “The problem for Bewley's was that it was very difficult for them to make any changes when a big section of their customer base didn't want to come with them. They were damned if they did, and damned if they didn't.”

Kerr left Bewley's in 1998, having decided he had done as much as he could with the company. He conceded that he also had some fears for the company's prospects, having noted that Irish tastes were starting to run toward something more sophisticated than the traditional Bewley's fare.

He decided to set up his own coffee business in association with the catering group Fitzers. He opened his first outlet, Perk, in the basement of the Laura Ashley store on Grafton Street in Dublin in November 1999, offering barista-served coffee and upmarket sandwiches. The next year, Kerr opened another store in Baggot Street, then another on Dawson Street.

Next came his big breakthrough - a contract with the UCD Quinn School of Business. Soon after that, Fitzers decided to withdraw from the business and Kerr set about hunting for a new partner. In September of last year he sold his chain of six Perk outlets to the Insomnia group, which had already acquired another rival group, Bendini & Shaw, and took a job as the group's commercial director. Late last year he was invited to become the company's chief executive.

“I suppose I decided it would be better to be a smaller part of something bigger than a big part of something small,” said Kerr. Insomnia and Perk had similar values and priorities - both made their own sandwiches and coffee, and both had avoided the franchise model pursued by the O'Briens sandwich chain.

“I think it's better to have full control of the premises and the management and who is hired,’' Kerr said.

Insomnia is pursuing an expansion strategy at present, partly though an affiliation with the Spar retail outlets, which involves leasing or selling fresh coffee-making equipment (it's a self-service option) to Spar stores.

It has eight such agreements in place, and Kerr believes 20 to 30 are possible.

“We decided we were in competition with the retail sector, so why not work with them?” said Kerr. In Insomnia stores, the strategy is to provide something a bit different from what's on offer elsewhere.

Insomnia coffee is brewed to order, for example, while wraps, sandwiches and cakes are made to in-house recipes, and the chain stocks a particular brand of crisps (Pipers) that you don't see anywhere else.

Kerr personally checks new products, recommending recipe changes. A new range of sandwiches is on its way, and Kerr is keen to embrace aspects such as minority dietary requirements. Insomnia is targeting teenagers with a range of iced drinks, hoping to turn them into coffee customers as they get older.

The company has 120 staff.

Kerr said it was far easier to hold and recruit good employees than before. “There are loads of Polish and Czech people that have excellent language skills, and it's made a huge difference,” he said.

Wages start at €7.60 an hour (minimum wage is €7), but Kerr said most staff earned between €8 and €9 an hour.

Insomnia is now moving to expand its business model across Ireland. It recently opened its first Cork store, in the Meadows & Byrne homewares shop in the city centre.

Given that the group doesn't wish to franchise, it makes sense to add another two or three Cork outlets, according to Kerr, and then to consider moving into Limerick and Galway.

Insomnia plans 10 more outlets next year, and is interested in acquiring other operators, though Kerr said the opportunities for takeovers were limited.

It is running a €200,000 promotion in Dublin and Cork, which shows it is taking the Starbucks challenge seriously, despite Kerr's claims not to be afraid of the giant's entrance.

Privately, existing operators are all hoping for one positive side-effect from the Starbucks arrival - a bit of upward pressure on prices.

Margins on items such as cakes and sandwiches are low compared with what can be made on hot drinks, Kerr said.

“More than 50 per cent of our turnover is now on beverages, and we'd be happy to see that higher.”